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Ryan and Lew: Finding the Ways and Means for a Budget Compromise

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Rep. Paul Ryan (R-WI) and Treasury Secretary Jack Lew have faced each other across a committee room in a number of hearings over the years, frequently contentiously. In 2011, when he ran the Budget Committee, Ryan memorably took then-White House Budget Director Lew to task over the President’s budget, telling him that the president “chose to duck” on the key issues facing the U.S. economy, and adding, “If George W. Bush suggested this proposal, I would say the same thing!”

But in Lew’s first appearance before Ryan since the latter took over the Chairmanship of the House Ways and Means Committee, the focus was more on areas of agreement than on divergence.

Lew was there to discuss the President Obama’s budget request for fiscal year 2016, and to be sure, Ryan is no fan of the proposal, which he had publicly derided as “envy economics” for its tax treatment of the wealthy over the weekend. He made his position clear in an opening statement. After pointing out that it contains tax increases which he opposes, he noted that it fails to balance the government’s book, even after ten years.

"So I’m pretty disappointed in this proposal. But as far as I’m concerned, let’s not focus on our differences. Today, let’s focus on where we can find common ground. And I think there may be opportunities to do just that.”

Paul went on to identify several areas where he said the White House and Congressional Republicans might be able to find common ground.

First, he said, in seeking to relieve the economy of the burden of the sequester, which would cut nearly $80 billion from federal spending next year, he said he hoped that the White House would agree to the approach Ryan and former Senate Budget Committee Chair Patty Murray (D-WA) took in crafting a compromise budget deal in 2013.

“I think the formula we reached in the last bipartisan budget agreement in the last session was the right precedent,” he said. “We understand that the mandatory side of the ledger book – the autopilot spending – is what is really not under control, is the source of our debt crisis in the future and needs to be reformed.”

“I think the agreement that you and Sen. Murray reached was important, and it’s one of the reasons that we are operating in a more normal way these last two years and one of the reasons the budget could be on time this year,” Lew said. “So I think working together is important.”

Ryan said that he believes the administration’s proposal makes some “baby steps” toward improving the tax treatment of small businesses that organize as pass-throughs for tax purposes, rather than incorporating.

“I think there is some common ground,” he said. “Will you work with us to explore more areas in trying to help these closely held small businesses…to help figure out their expensing issues? Because in this post-Dodd-Frank world, they have even tighter credit.”

He gave the administration limited credit for its proposal to deal with U.S. companies that have overseas earnings stashed abroad in an effort to avoid U.S. taxation. The administration wants to impose a one-time charge of 14 percent on all such earnings, with a permanent rate of 18 percent kicking in after that. The change, as envisioned by the administration, would be part of permanent business tax reform.

“I would take issue with probably the rate and the style…but putting that point aside, it’s a move in a constructive way,” Ryan said.

Finally, Ryan noted that he agrees with the administration on making an effort to expand eligibility for the Earned Income Tax Credit to workers not currently eligible, including childless adults. However, he noted that the program suffers from a high rate of improper payments, and suggested that addressing that problem might help fund the expansion.

“Will you work with us to figure out how we can clean up the management and the structure of the EITC so that we can get at this exceptionally high improper payment rate, and are there ideas you have about how it can be restructured and reformed so that it truly goes to those who are really truly supposed to get it and not to others?” Ryan asked.

“Let’s see if we can make the reforms pay for these improvements,” he said. “If we can contain it in itself I think that would be an enormous step in the right direction and that too could lead to a bipartisan common ground success.”

Lew said that while he was not certain that elimination of improper payments would fund the full expansion, that he was open to working with Ryan on that and other issues.

A longtime reporter on the intersection of the federal government and the private sector, Rob Garver served as a National Correspondent, based in Washington, D.C., for four years. He has written for ProPublica, The New York Times and other publications.